Blackrock Chinese Wealth JV gets licensed
Blackrock CCB Wealth Management has obtained approval from the China Banking and Insurance Regulatory Commission (CBIRC) to start an asset management business in China, nearly nine months after receive the green light to create the company.
The company is 50.1% owned by Blackrock, 40% by CCB Wealth Management – a 100% wealth management subsidiary of CCB – and 9.9% by Temasek, Singapore’s sovereign wealth fund.
“The Wealth Management Company (WMC) will leverage Blackrock’s investment and risk management expertise, as well as CCB’s client base and national distribution network to meet demand. Chinese investors for diversified asset management solutions and support the development of local wealth and assets. management industry, ”Blackrock said.
“Temasek will also bring its experience and strengths to bring long-term value to the development of WMC,” he added.
Blackrock, which has around $ 9 billion (£ 6.5 billion, € 7.4 billion) of AUM, asked the Chinese banking authority in July 2020 to form the JV, which will be based in Shanghai.
Blackrock’s Chinese ambitions
The partnership with Temasek and CCB is Blackrock’s latest move to tap into China’s growing private and public funds market, which U.S. consultant McKinsey predicts will exceed $ 22 billion by 2021.
In January 2018, Blackrock’s Wholly Foreign Owned Enterprise (WFOE) obtained a Private Fund Manager (PFM) license to launch onshore funds to qualified investors in China – i.e. institutions and wealthy individuals.
In June 2019, Blackrock’s PFM WFOE received an investment advisory license from the China Asset Management Association, which allows it to advise fund management companies and domestic distributors on products from specific investments.
The asset manager accelerated its expansion in China by applying for a fund management company license to establish a 100% owned retail (or public) mutual fund company in China on April 1, 2020, the first day allowed by Chinese authorities.
The China Securities Regulatory Commission (CSRC) gave Blackrock its initial approval soon after, but the company had to deregister its private fund management unit (PFM) – which he did in March 2021 – as he prepares to receive a mutual fund license.
Blackrock also operates two Qualified Domestic Limited Partnership (QDLP) funds in China, through Blackrock Overseas Investment Fund Management, which enables it to raise funds onshore to invest in offshore securities.
The company still owns 16.5% of Bank of China Investment Management, which is part of Bank of China.
“The Chinese market represents a significant opportunity to help achieve long-term goals for investors in China and abroad,” said Laurence Fink, President and CEO of Blackrock.
Reform of wealth management companies
The partnership with Temasek and CCB follows 11 measures introduced by China’s Financial Stability Development Committee in July 2019 to encourage foreign participation in the country’s financial markets. These were the removal of foreign ownership limits for fund management companies in 2020 and the authorization of foreign control of domestic WMCs.
France-based asset manager Amundi and BOC Wealth Management, a subsidiary of Bank of China, were the first to obtain approval to create a joint venture under this framework. The entity is 55% owned by Amundi and 45% by BOC WM, and launched its product in December 2020.
Then, JP Morgan Asset Management has broadened its “strategic partnership” in March 2021 with CMB Wealth Management, the WMC of China Merchant Bank.
Many Chinese banks have established wealth management subsidiaries in response to regulatory reforms, creating opportunities for Western asset managers.
In December 2018, regulators asked commercial banks to break implied guarantees for principal and interest payments on wealth management products (WMPs), thereby preventing their wealth management businesses from future bailouts.
The WMP industry has been a staple of China’s shadow banking system and a major concern of regulators keen to mitigate systemic financial risks.
On the other hand, the CBIRC has also relaxed the investment criteria for bank wealth management subsidiaries, allowing them to invest directly in equities, whereas banks were previously prohibited from doing so.
The regulator first approved the wealth management subsidiaries of the six major state-owned banks – the Agricultural Bank of China, the Bank of China (BOC), the Bank of Communications, the CCB, the Industrial and Commercial Bank of China and the Postal Savings Bank of China. .
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